Douglas Equipment v. EQT Production Company

Superior Court of Pennsylvania·Decided August 15, 2023·No. 674 WDA 2022·Unpublished

Opinion

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT O.P. 65.37

DOUGLAS EQUIPTMENT, INC.; : IN THE SUPERIOR COURT OF DOUGLAS ENERGY, LLP; FIRST : PENNSYLVANIA BAPTIST CHURCH OF WAYNESBURG; :

D & W RESOURCES, LP; AMY LYNNE :

MENDICINO AND MARK MENDICINO :

:

Appellants :

:

v. : No. 674 WDA 2022 :

EQT PRODUCTION COMPANY; GARY :

N. LEE; DEBORAH H. CAMPBELL AND :

MARY H. ULAM, ADMINISTRATRICES, :

D.B.N.C.T.A OF THE ESTATE OF :

WILLIAM E. HOLT, DECEASED; :

DEBORAH H. CAMPBELL AND MARY :

H. ULAM, EXECUTRICES OF THE :

ESTATE OF NIRA W. HOLT, :

DECEASED; ROBERT E. LEE AND :

MICHELLE LEE, HUSBAND AND WIFE, :

ROBERT LEE 2015 IRREVOCABLE :

TRUST; AND RICE DRILLING B LLC :

:

Appellees :

Appeal from the Order Entered May 10, 2022 In the Court of Common Pleas of Greene County Civil Division at No: AD No. 77-2017

BEFORE: BENDER, P.J.E., STABILE, J., and PELLEGRINI, J.* MEMORANDUM BY STABILE, J.: FILED: AUGUST 15, 2023 Appellants (collectively “Douglas Appellants”) appeal from the May 10, 2022 order entered in the Court of Common Pleas of Greene County granting summary judgment in favor of Appellees (collectively “EQT Appellees”) and

* Retired Senior Judge assigned to the Superior Court.

denying the Douglas Appellants’ motion seeking summary judgment against the EQT Appellees.1 The Douglas Appellants contend that the trial court erred in finding their oil and gas lease invalid and in finding the EQT Appellees’ oil and gas lease valid. After careful review, we affirm.

In many oil and gas lease cases, the factual history is lengthy and rather convoluted. This case is no exception. However, the parties do not suggest that any genuine issues of material fact are at issue here. We offer the following abridged version of facts pertinent to our review of the legal issues before us.

By deed dated August 31, 1972, the property in question (approximately 321 acres, referred to herein as “the Subject Land”) located in Gilmore Township, Greene County, was conveyed to J.K. Willison and his wife, Wynona, and to J. Kenneth Willison, Jr., and his wife, Sherry. The conveyance included all oil and gas rights for the property. On August 12, 1987, J.K. and Wynona Willison conveyed their undivided one-half interest in the property to

1 The Douglas Appellants include Douglas Equipment, Inc.; Douglas Energy,

LLP; First Baptist Church of Waynesburg; D&W Resources, LP; Amy Lynne Mendicino; and Mark Mendicino. The EQT Appellees include EQT Production Company; Gary N. Lee; Deborah H. Campbell and Mary H. Ulam, as Administratrices, D.B.N.C.T.A., of the Estate of William E. Holt, Deceased, and as Executrices of the Estate of Nira W. Holt; Robert E. Lee and Michelle Lee, husband and wife; Robert Lee 2015 Irrevocable Trust’ and Rice Drilling B LLC. The roles of the parties will be discussed as pertinent to the matters raised in this appeal. We note that Rice Drilling was dismissed from the action by agreement of the parties, see Trial Court Order, 5/10/22, at ¶1, and is not a party to this appeal, despite its name appearing in the caption.

J.K., Jr., and Sherry Willison (hereinafter “the Willisons”). Again, the conveyance included oil and gas rights.

On October 3, 1994, the Willisons entered into a lease with Douglas Equipment covering the property (“the Douglas Lease”). At that time, one vertical well was located on the property. Its operator transferred the well to Douglas Equipment in May 1995. See Deposition of Douglas Galbraith, 12/17/20, at 51; Reproduced Record (“R.R.”) 611a. As will be discussed herein, the last production from the well occurred in October 2008. Id. at 54; R.R. 612a.

The Douglas Lease, which was not recorded initially,2 leased the land to Douglas Equipment “for the purpose of exploring and operating for and producing and saving oil and gas.” Douglas Lease, 10/3/94, at ¶ 1; R.R. 97a. A provision set forth the duration of the lease as follows:

3. DURATION OF LEASE – To have and to hold the said land and privileges for the said purposes for and during a period of 1 (one) year from date of signing and as long after commencement of operations on said land, or any portion thereof[,] . . . is operated for the exploration or production of gas or oil, or as gas or oil is found in paying quantities thereon[.]

The Lessee shall have the right to shut-in any and all wells on said land on payment of a shut-in royalty as hereinafter set forth for a period up to three (3) years. Lessee has the further right to reenter the lease following termination of the lease in order to plug any and all wells, reclaim the surface and comply with all applicable laws.

2 The lease was eventually recorded in 2009, as an exhibit to a document that purported to ratify the Douglas Lease.

Douglas Lease, 10/3/94 at ¶ 3; R.R. 98 (emphasis added).3 The lease also included terms for production royalties to be paid to the Willisons for petroleum oil found and saved, and for each well that produced gas marketed by Douglas. Id. at ¶ 5; R.R. 99-100. Further, the lease provided for annual payments of $250 for up to three years as the shut-in royalty for wells no longer profitable to operate. Id. at ¶ 7; R.R. 100-01.

On July 26, 1999, while the Douglas Lease was in full force and effect, the Willisons conveyed the Subject Land by general warranty deed (“1999 Deed”) to William E. and Nira W. Holt (undivided one-half interest) and Robert Lee (undivided one-half interest) (together “Holts/Lee” or “the Holts and Lee”). The 1999 Deed included five exceptions, two of which related to veins of coal “within and underlying” the land, and two of which related to smaller tracts of land previously conveyed by the Willisons. The final exception was not for coal or other mineral rights or for tracts of land but rather was for “all rights, title, and interest” in the Douglas Lease, except for the lease’s free gas privilege for the personal use of the Holts/Lee purchasers. Deed, 7/26/99, at 2; R.R. 52a. (“Douglas Lease Exception”). Importantly, the 1999 Deed conveyed the Subject Lands to the Holts and Lee,

TOGETHER with all and singular the rights, liberties, privileges, hereditaments, and appurtenances, whatsoever thereunto belonging, or in any wise appertaining, and the reversions and remainders, rents, issues, and profits thereof, and also, all the

3 Because this case does not involve any claims relating to storage of gas, we have redacted the lease provisions addressing storage on the land.

estate, right, title, interest, property, claim, and demand whatsoever, of them, the said Grantors in law, or equity, or otherwise howsoever, of, in, to, or out of the same.

TO HAVE AND TO HOLD the premises hereby granted, or mentioned, or intended to be, with the appurtenances, unto the said Grantees, their heirs and assigns[.]

Id. at 3; R.R. 53a (emphasis added).

As the trial court recounted, the Willisons and Douglas Equipment entered into a “farmout agreement” in 2006 and as well as an exploration agreement in 2009 with other entities. Both agreements included expiration provisions that would kick in if no drilling took place within specified periods of time. Both of those agreements terminated under those terms without any drilling having occurred. Trial Court Opinion, 5/10/22, at 6-7.

Production from the well subject to the Douglas Lease stopped in October of 2008. Douglas Equipment made shut-in royalty payments to the Willisons for the three subsequent years and beyond.

Free access — add to your briefcase to read the full text and ask questions with AI

Douglas Equipment v. EQT Production Company, (Pa. Ct. App. 2023).

Douglas Equipment v. EQT Production Company (Douglas Equipment v. EQT Production Company) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related

Willison v. Consolidation Coal Co.
637 A.2d 979 (Supreme Court of Pennsylvania, 1994)
Higbee Corporation v. Kennedy
428 A.2d 592 (Superior Court of Pennsylvania, 1981)
Brown v. Haight
255 A.2d 508 (Supreme Court of Pennsylvania, 1969)
TW Phillips Gas and Oil Co. v. Jedlicka
42 A.3d 261 (Supreme Court of Pennsylvania, 2012)
Sterle v. Galiardi Coal & Coke Co.
77 A.2d 669 (Superior Court of Pennsylvania, 1951)
Hite v. Falcon Partners
13 A.3d 942 (Superior Court of Pennsylvania, 2011)
Wright, P. v. Misty Mountain Farm, LLC
125 A.3d 814 (Superior Court of Pennsylvania, 2015)
Clark v. Wright
166 A. 775 (Supreme Court of Pennsylvania, 1933)
Heasley v. KSM Energy, Inc.
52 A.3d 341 (Superior Court of Pennsylvania, 2012)
Nolt v. TS Calkins & Associates, LP
96 A.3d 1042 (Superior Court of Pennsylvania, 2014)
Cassell v. Crothers
44 A. 446 (Supreme Court of Pennsylvania, 1899)
Hunnell, R. v. Krawczewicz, G.
2022 Pa. Super. 166 (Superior Court of Pennsylvania, 2022)